Item 5: Fees and Compensation
Management Fee
Long/Short Funds
The Firm is paid an asset-based management fee by the Master Fund calculated
based on the net asset value of the Long/Short Funds, ranging between 1.25% and
2.0% per annum. The management fee is paid quarterly in advance, based on the
value of each investor’s capital account or net asset value of its shares, as applicable,
as of the beginning of each calendar quarter, adjusted for contributions and
withdrawals/redemptions made during the quarter. The management fee is deducted
in calculating net profit or net loss for purposes of computing the incentive fee. To the
extent the management fee is paid by the Master Fund, no management fee is paid by
the feeder funds. The Firm, in its sole discretion, may change the level at which it
receives the management fee.
The Firm, in its sole discretion, may also reduce, waive or otherwise modify the
management fee for investors, including, without limitation, those investors that are
members, principals, employees or affiliates of the Firm and the relevant general
partner, and relatives of such persons. The Firm has agreed to share a portion of the
management fee from the Long/Short Funds with certain strategic investors.
Long Only Funds
The Long Only Funds currently are not subject to a management fee.
Fund-of-One
The Fund-of-One’s terms were subject to negotiation with the Firm. The Fund-of-One’s
management fee is paid quarterly in advance, based on the value of the Fund-of-One’s
capital account as of the beginning of each calendar quarter, adjusted for contributions
and withdrawals made during the quarter. The management fee is deducted in
calculating net profit or net loss for purposes of computing the incentive fee. In the
event a fund-of-one or separately managed account advisory agreement is terminated
during a quarter, the Firm will refund any amounts prepaid on a pro rata basis based
on the amount of days remaining during the quarter.
Other Types of Fees or Expenses
Client Expenses – Funds
In addition to paying the management fee and the incentive fee, the Funds generally
pay their own operating expenses, as further described in each Fund’s Offering
Documents. These expenses include, but are not limited to: organizational and
offering expenses; expenses associated with the Funds’ investments and transactions
(including potential investments and transactions); research-related software
expenses (including Bloomberg terminals and subscriptions, other market information
systems, research management and corporate access tracking systems); costs of the
Firm’s client relationship management system, portfolio management system and any
other software used for accounting and/or monitoring the portfolio (including trading
and order management systems and services); costs of service providers providing
middle office services with respect to the Funds; proxy research and voting services;
investment-related travel expenses; professional fees associated with investments;
transaction fees, brokerage commissions, custodial fees, clearing and settlement
charges, and similar fees and expenses; expenses associated with legal and
regulatory filings of the Funds, as well as the preparation and filing of the Firm’s Form
13F, Form 13H, Form PF, Form N-PX and Form SHO, if and as applicable, and similar
filings; administrative, custodial, appraisal, valuation, legal, regulatory, compliance,
consulting, advisory and similar fees and expenses associated with the Funds’
operations, investments and transactions; expenses incurred in connection with
responding to requests or inquiries from a governmental entity, authority, regulatory
body or self-regulatory organization with respect to the Funds; broken-deal, failed
transaction, breakup and similar fees, costs and expenses; costs and expenses of
leverage or any other borrowings of the Funds, including any interest charges and fees;
expenses incurred in the collection of monies owed to the Funds; auditing and
accounting expenses of the Funds, including expenses associated with the preparation
of financial statements, tax returns and auditors’ fees and expenses; any entity-level
taxes, fees or other governmental charges on the Funds, including any withholding
taxes not due to the status or noncompliance of a particular investor; directors’ and
advisory board fees and expenses (as applicable); costs and expenses associated
with investor communications and reports; costs of service providers or software to
measure or monitor risk metrics, aggregate positions or provide risk metrics or position
reporting; costs and expenses associated with shareholders’ meetings (as applicable)
and the Firm’s travel to such meetings; insurance expenses; costs, fees and expenses
related to registration, qualification and/or exemption under any applicable laws, rules
or regulations; litigation expenses; extraordinary expenses; and all other costs, fees
and expenses associated with the business, affairs and operations of the Funds.
Feeder funds bear their pro rata share of the relevant master fund’s expenses.
Notwithstanding the foregoing, the relevant general partner and/or the Firm, as
applicable, may specially allocate the expenses described herein in any other manner,
including by allocating certain expenses to certain (but not all) investors, if the relevant
general partner and/or the Firm, as applicable, reasonably determines, in its discretion,
that it is more equitable to do so.
Client Expenses – Fund-of-One
The Fund-of-One’s expenses were subject to negotiation with the Firm. In addition to
the management fee and the incentive fee, the Fund-of-One bears expenses relating
to its investment and trading activity, including transaction fees, brokerage
commissions, custodial fees, clearing and settlement charges, interest on margin
accounts and other indebtedness, borrowing charges on securities sold short, bank
service fees and similar fees and expenses.
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